Sixth Circuit Overturns $11.1 Million Judgment Against MedQuest for FCA Violations

On April 1, 2013, the United States Court of Appeals for the Sixth Circuit overturned the $11.1 million judgment against MedQuest for its submission of claims to Medicare for tests in diagnostic testing facilities that were not supervised by approved physicians.  The whistleblower action was initiated by a former MedQuest employee, alleging that MedQuest, a leading diagnostic testing firm, and three of its independent diagnostic testing facilities (IDTFs) – the Charlotte Center, the Cool Springs Center and the Harding Center – submitted claims to Medicare for tests that were performed without the required level of physician supervision or were performed by physicians who lacked the required proficiency and certification to perform the tests.  Additionally, the government alleged that from January 2004 to July 2005, MedQuest submitted claims to Medicare using the physician billing number of the former owner of the Charlotte IDTF.  The U.S. District Court for the Middle District of Tennessee held that the claims submitted by MedQuest for diagnostic tests that were performed without the appropriate level of supervision or without the supervision of an approved Medicare physician, constituted an appropriate basis for an award of penalties under the False Claims Act.  The U.S. District Court ultimately awarded $11.1 million in treble damages and civil penalties to the Government.
On appeal, the Sixth Circuit overturned the District Court’s ruling stating that MedQuest’s use of non-approved supervising physicians for contrast procedures did not constitute an adequate basis for False Claims Act (“FCA”) liability.  The Court noted that MedQuest’s use of a billing number belonging to a physician’s practice also did not trigger the excessive fines under the FCA.  Despite dismissing the Government’s FCA claims, the Sixth Circuit had little sympathy for MedQuest and encouraged the Government to seek administrative remedies against MedQuest with the Centers for Medicare and Medicaid Services, such as suspension and expulsion from the Medicare program.